This is bad news for retired teachers in Ohio. Their pension fund lost $3 billion in the market, but the fund is set to award $9 million in bonuses to its employees.
Sure, the market’s down, and everyone is losing money. But this doesn’t seem like the right time to hand out performance bonuses.
COLUMBUS, Ohio – The board governing the Ohio’s teacher pension fund will consider a proposal on Thursday that could award $9.7 million in performance-based incentives to its investment associates, despite having lost $3 billion in the first 11 months of the year.
The fund for the State Teachers Retirement System of Ohio, or STRS, was valued at $94.8 billion June 30, 2021 and $91.8 billion on May 30 of this year, according to the most recent asset mix and portfolio performance report, posted online in mid-June. That’s a $3 billion loss.
What part of the fund’s performance deserves a bonus?
Diane Ravitch's blog 
Race to the Bottom?
race to the illiterate and superstitious
The STRS Board needs to suck-it-up and DEFEAT any recommendation to award bonuses without the performance to justify the bonuses !!!! End of discussions !
Wait. This is a spoof headline from The Onion, right? Can’t be true!
When private equity cowboys wheedle their way into public pensions, the result is often a disaster for public workers. Healthy pension funds manage the risk by investing in more conservative portfolios. Many states have failed to fund pensions adequately, and others have turned funds over to riskier investments. According to some Wharton analysts, with some pension systems “the fundamental flaw is that over the years employees were offered a future benefit that was not properly collateralized.” Handing out bonuses in a bear market that yielded a large loss is likely a sign of gross mismanagement and probable corruption.https://knowledge.wharton.upenn.edu/article/the-time-bomb-inside-public-pension-plans/
Your final sentence -hmmmm
There can be kernels of truth in research even when anti-pension John Arnold finances think tanks?
2017- Penn-Wharton Budget Model funded with $6.6 mil. from the John and Laura Arnold Foundation. Btw- the Foundation has been renamed Arnold Ventures.
Watch out.
Diane might get threatened with a law suit for saying that money is green.
Wait a minute… am I right that $3 billion represents a 3% loss? If that is so, with the volatility of the market the past year, only losing 3% is very good.
$3billion is a 3.3% loss
$9.7million is a 0.01% incentive.
The Dow Jones is down 15% so far in 2022.
Sounds to me like this modest incentive is in order, and the incentives appear to be spelled out in contract with fund managers.
Google says STRS serves 500k. Minus 100k active teachers = 400k retired.
$9.7million in investment co incentives, if redirected to retired teachers = $24.25 each—no help. The HUGE problem here is the failure to distribute appropriate, regular COLA’s to retired teachers. Another article I read said there are 5 pension funds for various public workers in Ohio: only the teachers’ pension fund has not been getting regular COLAs.
Just one more brick in the wall on the teacher shortage. Why would anyone teach in a state that frequently welches on its pension plan agreement?
Bethree5,
I agree that losing only 3% in the current investment environment is a relatively good outcome and allocating one one hundredth of a percent to bonuses is very reasonable.
1) $3billion is a 3.3% loss [3 out of 94.8 is actually 3.2%, but that’s a minor detail]
2) The Dow Jones is down 15% so far in 2022
That’s an apples to oranges comparison
I would think that one would have to compare the two losses for the same period (June 30, 2021 – May 30, 2022) But I’m not an economist, so what do I know?
During the given 11 month period, the DOW Jones Industrial average was not down 15%, but only about 4%.
So the 3.2% loss doesn’t look quite so “impressive”*. In fact, it looks pretty damned mediocre.
*if one can actually call **any*” loss “impressive” when one’s job is supposed to be actually making money on investments. But as I indicated below, mediocrity (and worse) are all too often rewarded on Wall Street.
Bonuses for mediocrity — and often much worse. Wall Street in a nutshell.
What happened to the financial advice that “indexing” is best?
Linda,
Indexed funds is an excellent idea in deep markets for assets like publicly traded firms in the US. These large pension funds invest in a much wider range of assets. They will often purchase buildings, invest in private companies, and buy individual bonds to hold to maturity (this is something that folks like me whose retirement is based on defined contribution plans should do)
posted on the internet
2.5 mil. in real estate
70 mil. in liquidity reserves
65 mil. in fixed income
70 mil. in domestic equities (it appears many of those are index funds)
30 mil in international
My question is how would the investment deciders do things differently if they didn’t anticipate bonuses?
Interesting that the fellow who calls himself an economist did not notice the fact that the two losses above were for different time periods.
Can’t get any more elementary.
TE should stick with what he knows: tweeting about sports.
STRS already over pays its staff by $millions before these totally undeserved bonuses OEA supports all the excessive bonuses
Many of these financial firms already charge pension systems exorbitant fees that are deliberately not disclosed to the membership.
FYI-https://www.forbes.com/sites/edwardsiedle/2022/07/04/teacher-police-and-firefighter-pensions-are-being-secretly-looted-by-wall-street/?sh=20147d437b4d
And even when Wall Street investors “fail” (sometimes spectacularly, as in 2008), they don’t. Not really. Many of the companies get bailed out and many of the people involved get rewarded with bonuses (taken out of those bailouts, thank us very much!)
It’s quite the (RICO) racket they have going. Wall Street is like the parasite which keeps threatening to kill it’s host if it’s host doesn’t give in to it’s ever increasing demands. Eventually, when the inevitable happens and the host dies. the parasite will simply move to a Caribbean island and be done with the whole country.
On the same day a bill was signed into law to give a $76 billion blank check to microchip companies, Intel announced it will be cutting back on plans to increase jobs by $4 billion while increasing dividends for its wealthy shareholders.”
Led by lavishly compensated CEO Pat Gelsinger, Intel lobbied aggressively for the CHIPS and Science Act, threatening to move more of its operations outside the U.S. if the subsidies bill wasn’t approved.”
https://www.commondreams.org/news/2022/08/18/sanders-blasts-rigged-economy-chipmakers-cut-investments-after-big-handout
Did Intel really do that on the same day? Wow, just wow.
Intels stock price reached an all time high soon after their current CEO Gelsinger assumed his position in Feb, 2021 and has dropped like a rock ever since and is now down over 40% since then.
Gelsingers plan to save the company is obviously to stick his hand out for a taxpayer bailout and if that is not forthcoming to threaten to take his marbles offshore.
Another “Socialize the losses, capitalize the gains” capitalist.
Ohioans should listen to Chris Tobe. He’s an expert in pensions. He is author of Kentucky Fried Pensions.
Based on the people they elect , most Ohioans would obviously rather listen to shysters who enact abortion bans that force ten year old rape victims to go out of state for the procedure (where yet more shyster politicians in Indiana go after the doctor who legally performed the abortion)
The politicians are obviously bad, but the main problem is actually not the politicians but the people who elect them.
The people I know in Ohio who vote Republican have personalities that are 100% selfish. Among them, the evangelical women that I know have a veneer of “care and concern.” They learn the words and demeanor in evangelical churches.
The LATEST loss, from their CAFR, is over an 11 BILLION LOSS. In today’s Forbes these words were printed: “The State Teachers Retirement System of Ohio, not part of this Ennis study, paid five investment officials more than $500.000 each in salary and bonuses in 2020, even as the system lagged slightly behind its total return benchmark. Ths plan’s bonuses are based largely on how it does over the long term, according to a spokesperson. Board member Rudy Fichtenbaum, who has a Ph. D. in economics, said he has studied the benchmarks and the incentive formulas but still feels in the dark. “I’m not a kindergarten teacher who just rolled in off the streets,” said Fichtenbaum, “but when I read the pay documents it’s unclear to me how this works. https://www.bloomberg.com/news/articles/2022-08-17/pension-veteran-tears-into-public-funds-for-bogus-benchmarking?fbclid=IwAR0v2O4XB2E0mcAcIOHXWoFMnHcCoI3J67tDApBplhMWVPoi3noEDQqDYNk
Here’s another interesting perspective on the public pension problem by David Sirota. While some states have some level of regulation to keep Wall St. from making reckless investments with public money, Wall St. is looking for ways to work around state pension system rules. https://jacobin.com/2021/07/public-pension-private-equity-investment
I’ve read about this, too. Greed never sleeps, never rests, and is always scheming.
Ohio State Teachers Retirement System toll-free number, 888-227-7877. They opened at 8:00.
Did the Ohio Teachers’ Pension fund lose money because of investments that lost value through their share prices dropping? This happened in California to CalSTRS back in 2007 and into 2008. CalSTRS lost billions due to investments losing value, but the companies behind the investments did not go out of business and in time they recovered.
From what I understand (and I could be wrong), CalSTRS looks at the long term, avoids risky investments, and treats Hedge Funds as if they were the plague (I hope since my retirement comes from CalSTRS.)
The value of investments in companies through stocks and funds goes up and down all the time, just like real estate when a property value bubble bursts.
The only way to lose money is if the pension fund employees responsible for buying and selling stocks, take too many risks and then panic and sells off loser stocks at a loss for less than they paid for it.
If the Ohio Teachers’ Pension Fund holds on to those investments and those companies that do not go out of business or bankrupt, then the value of those investments may rebound later. Over the long term, history shows the stock market always gains. Most loses are short term and the only way to lose is to panic and sell those investments at a lower price than what was paid for them.
Property bubbles often perform the same way. You may own a home that loses half of its value when a property bubble bursts, but if you don’t sell that home and you do not fall behind in your payments, over time, that property will often regain its value and continue to grow.
Now, if those loses were because the Ohio Teachers’ Pension Fund invested in Hedge Funds, then those are real loses while the Hedge Funds kept making a nice profit through their costly fees.
In that case, the bonus to the Pension Fund employees might be because of the Hedge Funds made a lot of money through the hefty fees they charge, even as the investors, in this case the Ohio Teachers’ Pension Fund, loses money. Several Teachers’ Pension Funds in Eastern states went bankrupt some years ago due to this legal con.
This is why only fools invest in Hedge Funds, or were bribed in some way to invest in Hedge Funds due to kick backs from the Hedge Funds. Hedge Funds are known to reward agents that bring them investments through kickbacks that I think are legal.
Lloyd,
Here is a list of the private equity holdings for CalSTRS as of June 30 2021: https://www.calstrs.com/files/3bca3402d/PrivateEquityPerformance-06302021.pdf
Private equity makes up about 15% of the total assets they hold. You should recognize many of the names: Bain Capital, Blackstone, Carlyle, etc.
Who are you to question our moneyed overlords?
Even when everybody else loses, the financial folks on Wall Street always win.
Hell, JP Morgan Chase CEO Jamie Dimon got a $20 million pay package immediately after he concluded a deal with DOJ that had his company paying $13 billion in fines for the securities fraud they had committed leading up to the 2008 financial meltdown.
Of course, he kept everyone who worked for him out of jail and didn’t have to admit any criminal activity by his company, which is the reason he got paid so much.
And in 2020, JP Morgan Chase was again fined — this time nearly a billion dollars for manipulating the precious metals market .
And guess what? Dimon’s pay package was again increased.
Cleveland.com podcast on this issue.
https://www.cleveland.com/news/2022/08/what-a-scam-lose-3-billion-for-ohio-teachers-get-rewarded-with-97-million-in-bonuses-today-in-ohio.html
Just in the beginning of podcast.
Our last 2 Ohio Deferred Comp statements have been a kick in the gut, too.
I started teaching in Ohio in 1993, and I now begin my 30th year. The last time STRS speculated incorrectly, I, along with all current employees, ended up with an extra five years tacked onto our careers. All to receive even less of a percentage of our retirement than promised back when we began. This is a huge reason why I resent this job and will never, ever recommend it to anyone. Countless other reasons for this resentment have been identified and discussed thoroughly throughout this website.
Ironically, teaching children is not among them.
Teaching kids is the great part of it.
Yes, but as DeSantis points out, anybody can teach, so line up all those politicians (especially the particularly stable geniuses from Florida and Texas :Matt Gaetz, Ron DeSantis, Greg Abbutt, Ted Cruz, Donald Trump, etc)
Unfortunately, Jeffrey Epstein is no longer available. But Ghislaine Maxwell is.
Jeffrey Epstein didn’t have a degree but did have some experience. He began his stellar rise to the bottom as a teacher in a private school. Probably where he honed his skills.
He would have made the perfect DeSantis teacher candidate. But alas, things just did not work out.
He was given that private school job by Bill Barr’s father!!!
Ron must be DeSantistated.
Hey, you are speaking ill of the guy who has the votes of Alex Jones and Elon Musk and Joe Rogan and Satan. Overwhelming support.
Sorry, a correction. Satan’s office says that it is withholding endorsement until it learns whether Donald is going to run.
Donald or Ronald. It’s a tuffy!
Elon Musk has taken his marbles and will no longer play with the Democrats.He’d rather play with himself.
And like Trump, we will probably never hear the end of Bill Barr bagends.
yup
Bill Barr Baggins and Smeagol (Rudy Giuliani)
AKA, Ghouliani, aka Rudolph, the Brown-Nosed Reign Dear
The resemblance of Giuliani and Smeagol is uncanny!
A big problem with teaching is that it is subject to the “slings and arrows” of outrageous politicians. The best part of teaching is the teaching, if you are allowed to do it. Congrats on making it to thirty years.
The slings and arrows of outrageous politicians. One of the best phrases ever, SomeDAM! Bravo!
I agree but you are congratulating the wrong person.
That was retired teachers most excellent saying.
Thirteen hours ago, Jo Ingles of Ohio Public Radio and Public Television posted an article about a Thursday vote relating to the bonuses. Her article mentions Ohio Treasurer Sprague who is running for re-election in Nov.
He is part of the Koch-linked SFOF referenced in the NYT article that Diane linked 8-11-2022. The NYT article is, “How Republicans are Weaponizing Public Office Against Climate Change.” The Koch network is anti-public pension.
There needs to be a review of OEA. With friends like them….
I’m only down 1.16%, where’s my $9 mil?
Ameritocracy
Ameritocracy
I only lost 3 billion
While DOW Jones dropped by 4
My bonus was a million
But should have been much more
I don’t know what it takes to get one of the “bonus-paying” jobs at STRS. What percentage are women? (1) In fairness, there should be a goal to have a representative match with the demographic profile of the the people STRS serves.
(2) The whole benchmarking set-up seems to provide opportunity for ….
(3) In the long run, which is what pension funds are about, the salient and only benchmark that matters is STRS compared to indexed funds.
It seems to me that a professional gets paid a fair wage and is expected to do his /her job. Due to no fault of his/her own, a downturn in investments doesn’t reduce his/her salary so, why should an upturn in profit benefit him/her? But, to have it both ways….
“Due to no fault of his/her own, a downturn in investments doesn’t reduce his/her salary”
Whatever else may be true, to believe (as financial analysts do) that one should always just get rewarded and never suffer any loss when Main Street does is a profoundly perverse attitude that goes against everything the Wall Street types pretend to be and stand for.
It makes a mockery of their claim to believe in capitalism — to say nothing of actually be capitalists.
Such people would have done very well under the Soviet Communist system because they are experts at diverting other people’s money to their own pockets.
Or at least better than the vast majority.
And they would do spectacularly well in Putin’s Russia.
SomeDAM, the staunchest capitalists ALWAYS protect themselves from the ravages of capitalism. Bankers, for example, lend other people’s money and imaginary money get borrowers to pay them for the privilege of borrowing money that partly (10 percent) belongs to other people and partly (90 percent) exists only as a notation of the borrower’s debt. So, all this lending is as close to risk-free as you can get, and it’s done only if the borrower has sufficient assets not actually to need the money. LOL. So, basically, they spout a line about the free market and entrepreneurship and risk taking and corresponding reward and then try to take no risks whatsoever while being maximally rewarded. And, of course, a charter to run a bank is a license to lend imaginary money, turn others into debt slaves, and get real money plus breathtaking amounts of interest in return.
I suspect that most people don’t know that this is how it works, that bankers can lend 10 times what they have in deposits and that this system is designed to transfer the value of the work of the average person, over his or her lifetime, to the banker. If, de novo, people were told, hey, I’ve got a great system for you, and this were explained to them, they would naturally have a WTF reaction. Fractional reserve banking. We lend you 10 percent other people’s money and 90 percent money that we don’t have but that exists only as a computer entry, and exchange, we get, over your lifetime, three times what we “loaned” you, amounting to the majority of the value of your labor over that lifetime. Quite the system. Oh, it’s good to be king.
In Europe post offices lend money. It makes for a far better system than the predatory payday loan scam that politicians are paid to ignore.
Thanks to Biden for forgiving more of the student loan debt.
Every sector of our economy is in the stranglehold of predatory corporations.
And many if not most of the politicians in Washington (regardless of party) are bought and paid for by the same corporations.
To be sure, some of those politicians throw bones to us dogs from time to time to keep our tails wagging, but nothing really changes.
That’s not just my opinion, by the way.
In 2009, in an effort to get banking reform after the big banks had just cratered the world economy with their fraudulent activities, Democratic Senator Dick Durbin said this
“the banks — hard to believe in a time when we’re facing a banking crisis that many of the banks created — are still the most powerful lobby on Capitol Hill. And they frankly own the place“
I unfortunately have had to relinquish any notion that the U.S. isn’t controlled by the richest 0.1%. The conservative Catholic SCOTUS majority acting on their ideology (and, money for the Church) adds salt to the wound.
I hope that Diane will post that yesterday, Ohio STRS voted to give $9.66 mil. in bonuses to 100 employees involved in investments for the public pensioners. (A couple of years ago, I read the average public pension was $19,000 a year.) The bonus is in addition to the employees’ high fixed salaries
Wouldn’t it be nice if the idea was to do well enough to give pensioners a bonus?
yes